Moody's cuts Ohio Casualty

Moody's Investors Service lowered the ratings of Ohio Casualty Corp., including the 5% convertible to Baa3 from Baa2, and subsidiaries on third quarter earnings that showed charges for adverse loss development and a larger than expected writedown of intangible assets. The outlook is stable.

In its third quarter report, Ohio Casualty also noted that it would be unable to meet operating performance targets previously set forth in its 2002 plan.

Moody's noted continued focus on expense management, re-underwriting and repricing has contributed to improved performance.

The rating agency added, however, that the continued decline in statutory capitalization, to $680 million at third quarter from $763 million in the prior quarter, and increased operating leverage were not anticipated when Moody's affirmed the ratings in first quarter.

Moody's said the downgrade also reflects continuing challenges in lowering expense ratio and that the potential for further losses on business written in prior years remained a general concern.

S&P rates Bunge BBB

Standard & Poor's assigned a BBB senior unsecured debt rating to Bunge Ltd. Finance Corp.'s new $250 million 3.75% convertible notes due 2022 and affirmed its other ratings. The outlook is stable.

Moderate financial policies and improving profitability measures, as well as an experienced management team, provide support for the ratings.

The strengths are offset by the predominately commodity-oriented nature of operations, which are subject to the price variability due to supply and demand, plus intense competition.

Especially important is the highly liquid balance sheet, reflecting hedged commodity inventories, S&P said.

Pro forma adjusted EBITDA to interest is expected to be in the 5.5x area, adjusted pretax coverage in the 3.5x area, and adjusted total debt to EBITDA of about 3x. Adjusted EBITDA margins are expected to remain in the 4.0% to 4.5% range.

Liquidity consists of $247 million of cash and marketable securities, highly liquid commodity inventories, availability under seasonal lines of credit, and $450 million of availability under a $600 million commercial paper facility at Sept. 30, S&P said.

In addition, there is a $460 million three-year revolving credit facility with $150 million outstanding at Sept. 30, an undrawn $67 million two-year senior credit facility and a $50 million three-year senior credit facility that was fully drawn at Sept. 30.

Furthermore, Bunge has entered into a €500 million 364-day revolving credit facility in anticipation of refinancing debt assumed as part of an acquisition.

S&P raises PacifiCare outlook

Standard & Poor's raised its outlook on PacifiCare Health Systems Inc. to stable from negative and assigned a B rating to its $125 million 3% convertible subordinated debentures due 2032.

S&P said the rating reflects PacifiCare's good business position as a regional managed care organization and improved earnings performance.

Offsetting these strengths are PacifiCare's marginal capitalization and high percentage of goodwill in its capital, S&P added.

S&P said it expects that PacifiCare's earnings performance will continue to improve in 2002 and 2003, with pretax operating income of about $260 million for 2002. With the proposed new debt issue, Standard & Poor's expects the company's debt-to-capital ratio to remain close to the current level of less than 40%. Total membership is expected to decrease by about 5% in 2003.

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